STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

1. O. STONE BUICK GMC TRUCK, INC. ) and GENERAL MOTORS CORPORATION/GMC ) TRUCK DIVISION, )

   )

   Petitioners, )

   vs. ) CASE No. 91-6052

   ) CHARLIE HARRIS PONTIAC, INC. ) and DEPARTMENT OF HIGHWAY SAFETY ) AND MOTOR VEHICLES, )

   )

   Respondents. )

   )

   
   

   RECOMMENDED ORDER

   
   

   Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a formal hearing in this case on April 13, 1992, in Tallahassee, Florida.

   
   

   APPEARANCES

   
   

   For Petitioner: Edward W. Risko, Esquire GMC: General Motors Corporation

   New Center One Building 3031 West Grand Boulevard Detroit, Michigan 48232

   
   

   Dean Bunch, Esquire CABANISS BURKE & WAGNER

   851 East Park Avenue Tallahassee, Florida 32301

   
   

   For Petitioner: Mark Herron, Esquire

   J.O. Stone AKERMAN SENTERFITT EDISON Buick: & MOFFITT

   Post Office Box 10555 Tallahassee, Florida 32302 2555

   
   

   For Respondent: Daniel E. Myers, Esquire Charlie Harris Walter E. Forehand, Esquire Pontiac: 402 North Office Plaza Drive

   Suite B

   Tallahassee, Florida 32301

   
   

   For Respondent: No appearance at hearing DHSMV:

   STATEMENT OF THE ISSUES

   
   

   Whether the existing same line-make dealers are providing adequate representation for General Motors Corporation/GMC Truck Division in the community or territory.

   
   

   PRELIMINARY STATEMENT

   
   

   General Motors Corporation/GMC Truck Division (GMC) gave notice of its intention to establish an additional GMC truck dealer at 30777 U.S. Highway 19 North, Palm Harbor, Florida, by publication in the Florida Administrative Weekly for August 16, 1991, and by letter to Charlie Harris Pontiac, Inc. (Harris).

   The proposed dealer is J.O. Stone Buick/GMC Truck, Inc. ("Stone"). Harris and Bayview Buick/GMC Truck, Inc. filed a protest in accordance with Sections 320.642 and 320.699, Florida Statutes on September 13, 1991. Bayview withdrew its protest on November 1, 1991. Thereafter, the matter was referred to the Division of Administrative Hearings by letter from Respondent, Florida Department of Highway Safety and Motor Vehicles, on September 19, 1991.

   
   

   Pursuant to a notice of hearing dated January 29, 1992, final hearing was noticed for April 13-15, 1992, and was heard as scheduled.

   
   

   At the hearing, GM presented the testimony of James Anderson, an expert in dealer network planning and Victor D. Nelawake, a certified public accountant. Harris presented the testimony of Dr. Lyman Ostlund, an expert in automotive retailing.

   
   

   Petitioner GM and Respondent Harris filed proposed Recommended Orders which were considered in preparation of this Recommended Order. Petitioner GM's proposed findings are substantially adopted and incorporated herein. Proposed findings not incorporated herein are the subject of specific rulings in an Appendix.

   
   

   Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, the following relevant facts are found:

   
   

   FINDINGS OF FACT

   
   

   1. J.O. Stone Buick/GMC Truck, Inc. (Stone) seeks to establish a GM truck dealership in the vicinity of Palm Harbor, Florida.

      
      

   2. The proposed location is within an area identified by GM as the StPete/Clearwater Multiple Dealer Area (MDA).

      
      

   3. An MDA represents a single area of primary responsibility (APR) assigned by GM pursuant to its dealer sales and service agreement to more than one GMC truck dealer. Also included within the MDA are GMC truck dealers Bayview Buick GMC/Truck, Inc. (Bayview), Port Richey; Charlie Harris Pontiac, Inc. (Harris), Clearwater; and Crown Oldsmobile GMC/Truck, Inc. (Crown), St. Petersburg. "Fringe dealers" are GMC truck dealers whose APR is adjacent to or touching the MDA. There are five (5) fringe dealers whose area is adjacent to or touching the MDA.

      
      

   4. Buyer behavior or cross-sell is a means of determining whether areas associated with fringe dealers are connected from a marketing perspective to the MDA, thereby forming a single inter-connected marketing area for a particular

      line of motor vehicles. Experience has demonstrated that for a fringe area to be connected to an MDA from a marketing perspective, at least 30% of the fringe dealers new vehicle sales should be to MDA consumers.

      
      

   5. In this case, no fringe dealer makes 30% of their sales to MDA consumers. Courtesy GMC's percentage is highest at only 10.9%, far below the minimum required for inclusion. Accordingly, none of the fringe dealer areas are part of the relevant community or territory.

      
      

   6. Buyer behavior or cross-sell information is also useful to determine whether the areas contained within the MDA form a single interconnected marketing area. However, the MDA boundary is entitled to "great weight" in making any such determination.

      
      

   7. The MDA consists of four Areas of Geographic Sales and Service Advantage (AGSSA), each associated with an existing GMC truck dealer of the proposed dealer location; Bayview, AGSSA 8, Harris, AGSSA 9; Crown, AGSSA 10; and the proposed Stone location, AGSSA 14.

      
      

   8. An AGSSA is an area in which a dealer has a convenience advantage over other dealers of the same line-make due solely to proximity of its location to consumers residing there. These boundaries are verified using road networks, locations and buyer behavior to determine if there are any barriers that may raise a question about geography assignment. In this case, there was no basis to question the area assignment by distance. All vehicle registrations are collected by R. L. Polk & Company. They are organized in areas as large as the nation and as small as census tracts. Sales by individual dealers are reported to GMC and can be subsequently traced to the place of registration.

      
      

   9. Buyer behavior shows that AGSSA 8 is not connected to the rest of the MDA from a marketing perspective. This is so as only 3.5% of all GMC truck registrations in AGSSA 8 were attributable to Harris or Crown. Conversely, only 10.8% of Bayview's 1990 GMC truck sales were registered in the combination of AGSSAs 9, 10 and 14. Through September of 1991, only one registration in the remainder of the MDA was attributable to a sale by Bayview. This fact, combined with a stretch of approximately 18 miles between the proposed location and Bayview in Port Richey, confirms that AGSSA 8 should not be included in the community or territory for the proposed dealer.

      
      

   10. Contrawise, 75.7% of Harris' and 78.6% of Crown's nationwide retail registrations are in the balance of the MDA, that is AGSSAs 9, 10 and 14. Thirty-four percent of Harris' sales are registered inside AGSSA 9 and 41% are registered outside AGSSA 9 but inside the balance of the MDA. Thus, Harris satisfies the test for inclusion in any community or territorial definition for a Palm Harbor GMC/Truck Division.

       
       

   11. AGSSA 10, however, is somewhat more difficult to determine. As example, 23% of the GMC truck customers in AGSSA 9 went to Crown. This level is considerably higher than Port Richey but is still below the 30% criteria. Sixty percent of Crown's sales are registered in AGSSA 10 which is somewhat higher than normal in a connected market. Nineteen percent of Crown's sales are registered outside AGSSA 10 but inside AGSSAs 9 and 14. This percentage does not change the fact that AGSSA 8 is included, further demonstrating that AGSSA 8 is not connected, from a marketing perspective, to the remainder of the MDA. While 19% and 20% do not meet the 30% test, it is still considerably higher than Bayview's participation and it is possible that enhanced intrabrand competition, by the addition of a dealer in Palm Harbor, could stimulate additional cross-

       sell between the other AGSSAs sufficient to raise Crown's level of participation to 30%. Given that fact, AGSSA 10 is included within the MDA boundary, which must be afforded great weight, and since it is not possible to unequivocally state the area is unconnected, it is appropriate therefore to regard AGSSA 10 as part of any community or territory for the proposed GMC truck dealership.

       
       

   12. Accordingly, AGSSAs 9, 10 and 14 form the relevant community or territory for this proceeding with AGSSA 14 representing an identifiable plot within the community or territory. Alternatively, AGSSA 14 would be an identifiable plot of any community or territory comprised of the entire MDA.

       
       

   13. Market share or penetration is one of the most commonly used standards for evaluating dealer network performance. As between state and national averages, national average forms the starting point. A lower state average may affect statewide network deficiencies that would improperly lower the standard to a level of inadequacy measuring adequate performance. National average includes both adequately and inadequately represented and unrepresented markets. It therefore represents a conservative measure for gauging adequate performance.

       
       

   14. In this case, national average has surpassed the Florida average at least since 1988. Statistical evidence introduced herein, reveals that about two-thirds of this shortfall is due to network deficiencies. Florida is not only below national average, but also below 38 other states and, on average, there are fewer GMC truck dealers in Florida in relation to intrabrand competition. Accordingly, national average is a reasonable starting point for developing a standard to evaluate performance in the community or territory.

       
       

   15. To properly evaluate dealer network in a given area, the evaluation standard should consider the influence of unique market characteristics. These characteristics may be accounted for by adjusting performance standards according to local area consumer preferences for various types of vehicles, independent of brand, resulting in a minimum expectation or penetration. Depending on a particular brand's performance in a given area, minimum expectations could be either greater or less than overall national average penetration.

       
       

   16. GM has segmented the light truck industry into ten categories that contain vehicles that are viewed by consumers as relatively more interchangeable than vehicles outside the segment. Differences in segment popularity between the nation and the community or territory result in lowering minimum expectations to account for unique characteristics. Specifically, these expectations are as follows: 6.33% for the community or territory; 6.21% for AGSSA 14 alone; and 6.36% for the MDA, each of which is lower than the national average of 7.41%. GMC truck performs best in the full-size pickup, truck wagon and full-size panel van segments which constitute a smaller portion of the truck market in the community or territory or AGSSA 14 alone accounting for reduced expectation in those segments.

       
       

   17. Seventeen (17) Florida GMC truck markets in 1990 and twenty-three (23) through September of 1991 met or exceeded expected penetration for the area. That several other Florida markets exceed expected penetration calculated in the same manner confirms its reasonableness as a standard for dealer network evaluation. Of significant note was the fact that the community or territory in AGSSA 14 however not only failed to reach the minimum expected averages but ranked in the bottom fifth of all Florida markets in terms of expected performance in 1990 with AGSSA 14 ranking next to last through September of 1991.

   18. Gain tracts are census tracts in which GMC truck market share exceed expected penetration calculated for that specific census tract. Analysis of gain tracts in the community or territory confirms the reasonableness of expected penetration. However, given the low average performance of the community or territory, there are relatively few gain tracts overall and their existence demonstrates that such a standard can be achieved in this area. Additionally, those that do exist tend to be clustered around existing dealer locations in AGSSAs 9 and 10 with only one in AGSSA 14 demonstrating that convenience may be a factor in the ability to achieve expected averages.

       
       

   19. Analysis of age and income distribution also confirms the reasonableness of expected penetration for measuring performance in the community or territory in AGSSA 14. Based on that analysis, GMC truck's expected market share in the community or territory in AGSSA 14 alone or the MDA is about 20% higher than expected based on product popularity. The performance standards however, should not be changed to reflect these increases as expected penetration, based on what line-makes consumers actually purchased, is more reliable than any standard derived from analysis predicting what consumers should do given certain characteristics.

       
       

   20. The effects of lease transactions on GMC truck performance in the community or territory or AGSSA 14 was insignificant and did not impact the validity of the evaluation standard or otherwise explain GMC truck's relatively poor performance in AGSSA 14 or the community or territory.

       
       

   21. The community or territory, AGSSA 14 and the MDA have continuously performed well below minimum expectations since 1988. The community or territory has steadfastly declined from only 74.4% of expected in 1988 to 56.3% of expected through September of 1991. AGSSA 14's level of performance has been worse, declining from 72% of expected in 1988 to a low of 34.2% through September of 1991. Finally, the MDA as a whole has failed to meet its minimum performance requirement decreasing from 78.8% of expected in 1988 to 54.1% through September of 1991.

       
       

   22. Additionally, GMC truck performance in AGSSA 14 has been below a standard derived from the balance of the community or territory (AGSSAs with dealers or the balance of the MDA). In contrast to the remainder of the community or territory, AGSSA 14 declined from 94.9% in 1988 to 53.5% through September of 1991, and from 87.7% to 56% during the same period for the remainder of the MDA.

       
       

   23. None of the AGSSAs with dealers are meeting minimum performance expectations. In 1990, AGSSA 8 achieved 64% of the minimum expected; AGSSA 9 - 58% and AGSSA 10 - 61%. Thus, AGSSA 14 is performing at levels that are inadequate even in comparison to a standard derived from inadequately represented markets.

       
       

   24. Inadequate representation stems from either an improperly designed dealer network or inadequately operated dealerships within the network or both, which may result in an inability to provide effective intra or interbrand competition. Effective competition results in an increased awareness of the product through advertising and convenient presence where consumers shop thereby stimulating additional sales.

       
       

   25. There has been significant population growth in the community or territory in each of the three AGSSAs with concentrations through AGSSAs 9 and

       10 and extensive clustering of growth in AGSSA 14 around the proposed Stone location. Specifically, the southern half of AGSSA 10 shows a decline in households while a greater number of areas in the northern half reflect increases. Areas reflecting an increase in households predominate in AGSSA 9 with only a few census tracts reflecting a decline. All but one census tract in AGSSA 14 reflect an increase in households in higher concentration than observable in AGSSAs 9 and 10 with the greatest concentration around the proposed location.

       
       

   26. AGSSA 14's growth has been the most dramatic increasing more than 300% from 1970 through 1991. AGSSA 9's increase of 121,755 households during the same period is sufficient and these growth trends are predicted to continue through 1996.

       
       

   27. Respecting growth in household trends, AGSSA 14 households grew more than 425% during the period and is predicted to grow more than 508% by 1996. AGSSA 9 households too, have increased significantly to approximately 179% from 1970 to 1980 and more than 200% through 1991. A similar trend exists throughout the community or territory and the MDA and this trend is also projected to continue.

       
       

   28. Based on these growth trends, increased congestion persists which makes it necessary, more than ever, to establish a dealer network conveniently located to adequately service the area consumers.

       
       

   29. Average household income throughout the entire community or territory consists of middle and upper income levels. Only two census tracts located in AGSSA 10 had household income levels below $15,000.00. These income levels demonstrate strong potential for new vehicle sales.

       
       

   30. The employment trends in the area mirrors population growth demonstrating strength in the economy with expanding opportunities for new vehicles sales.

       
       

   31. Retail light truck registrations in the community or territory essentially followed the pattern of household and population density with heavy concentrations in AGSSAs 9 and 10 and around the proposed location in AGSSA 14. Since 1982, light truck registrations have increased 148% in AGSSA 14. Retail light truck registrations in the community or territory have more than doubled during that same time, to wit, 4,866 to 10,095.

       
       

   32. The community or territory offers more opportunity per existing GMC truck dealer than all but two markets in Florida. Even with the addition of a third dealer, market opportunity per GMC dealer remains higher than that available in 37 other markets providing sufficient opportunity for an additional dealer. Similarly, the marketing network is not too large for the existing network to provide adequate representation.

       
       

   33. In each significant category, driving age population, household population, and registrations, the rate of growth in AGSSA 14 during the relevant period has surpassed the national rate several fold. To a lesser extent, the rate of growth in the area has surpassed the nation in every category except registration which reflects an increase of almost 6%. To keep pace with the growth rate in the community or territory, an additional dealership should have been added to the community or territory during 1980.

   34. Only 14.3% of the markets that exceed 225 expected registrations per GMC truck dealer meet or exceed expected penetration. Based on this inadequacy, the dealer network is too small to provide adequate intra and interbrand competition in the market. To have a reasonable chance of meeting expected penetration, the network should be redesigned to exceed the critical signs of

       225 expected registrations per dealer.

       
       

   35. As it presently exists, the GMC truck dealer network in the community or territory is configured to 320 expected registrations per dealer which is 95 additional registrations over the target number of 225 expected registrations.

       
       

   36. Respondent Harris' sales are concentrated in AGSSA 9 with some registrations in both AGSSA 10 which has a dealer and AGSSA 14. Respondent Harris' has demonstrated an inability to obtain a reasonable share of the light truck business at distances within close proximity of its dealership and its sales penetration dropped to about 1% of the available business at distances beyond 4 miles of the dealership. Likewise, Crown has demonstrated an inability to penetrate the market in any significant way. Specifically, community or territory registrations attributable to Crown are concentrated in AGSSA 10 with fewer in AGSSA 9 where Respondent Harris is located. While Crown's ability to penetrate the market within two miles of the dealership is slightly better than Respondent Harris, it immediately drops off to less than 2% after six miles and next to nothing at distances closer to the proposed location.

       
       

   37. Without the proposed dealer, AGSSA 14 consumers are disadvantaged compared to consumers in AGSSAs 9 and 10 with respect to a conveniently located GMC truck dealer. Without the proposed dealer, consumers are on average approximately nine miles from the nearest GMC truck dealer. This is twice as far as the convenience offered customers in AGSSAs 9 or 10. With the proposed dealer in AGSSA 14, convenience will improve to 3.48 miles on average without changing the level of convenience offered consumers in AGSSAs 9 and 10.

       
       

   38. Likewise, without the proposed dealer, GMC truck offers consumers in AGSSA 14 the worst level of convenience of most brands that offer light trucks placing GMC truck at an interbrand competitive disadvantage. With the proposed dealer, convenience levels reflecting that similar to the interbrand competitors, would be provided.

       
       

   39. The inadequate penetration in AGSSA 14 is based on the significant growth in that area coupled with poor convenience levels which can only be improved by redesigning the network to add new representation to improve convenience levels in AGSSA 10.

       
       

   40. Anderson conducted an optimal location analysis which shows that the proposed location is best suited to maximize convenience and improve the level of interbrand competition.

       
       

   41. Gross registration loss is a measure of the opportunity available inside a market which has been lost both to existing dealers and the manufacturer. It represents the number of registrations needed to raise each census tract to its expected penetration as adjusted for segment popularity. In the case sub judice, the combined gross registration loss for the community or territory is 296 units.

       
       

   42. Insell are GMC truck sales by dealers outside the community or territory that are registered inside the community or territory representing loss opportunity to existing community or territory dealers though not to the

       manufacturer. Ninety-seven (97) registrations throughout the community or territory are from insell. Thus, the total loss opportunity to Respondent and Crown is three hundred ninety-three (393) units.

       
       

   43. Assuming that Stone had been in business in 1990 at the proposed location and performed similar to Respondent and Crown, it would have been responsible for eighty-six (86) GMC truck registrations or approximately 21.9% of the total loss opportunity. This number reflects only 21.9% of the total loss opportunity in the community or territory and is achievable without taking a single sale from existing dealers. Likewise, substantial additional opportunity would remain for existing dealers in areas where they have a competitive advantage, provided they compete for that opportunity.

       
       

   44. Assuming that Stone had been in business in 1990 and performed the average of all fringe dealers, which is considerably higher than the average for Respondent and Crown, Stone would have registered an additional 186 units reflecting 47.3% of the total loss opportunity and more than 100 units less than gross registration loss alone.

       
       

   45. The loss opportunity calculation reflects a conservative measure of the opportunity available since it is premised upon the number of sales needed to reach minimum expectation. To realistically measure the opportunity available to an aggressive network, it would be appropriate to include only those markets that are meeting minimum expectations and therefore are being adequately represented.

       
       

   46. If gross registration losses calculated according to a standard derived from Florida markets that meet or exceed an expected standard, the total loss opportunity increases to 576 units in 1990. The projected sales for the new dealer represent only a fraction of this assessment of the reasonable opportunity available using either community or territory or fringe dealer profiles. This situation remains whether opportunity is calculated within the community or territory or only within a larger 20-mile radius.

       
       

   47. Previous experience demonstrates that under such marketing conditions, the new dealer sales will come from loss opportunity and not existing dealers in the MDA. As example, when a new GMC truck dealership was added to the West Palm Beach MDA, GMC truck penetration efficiency increased from 17.8% before to 84% after the addition. During that period, sales by existing dealers remained level while the new dealer registered an additional 278 units. Likewise, while the number of registrations for MDA dealers increased, insell declined sharply demonstrating that sales by dealers outside the area represent opportunity to dealers inside the area. Similar GMC truck experiences have been noted (in Florida) where the addition of a GMC truck dealer to a market substantially enhances GMC truck performance often causing performance to increase beyond minimum expected levels. Specifically, in Venice, Florida, with the addition of a new dealer, a resultant increase in performance efficiency was noted from 55.8% going to 158.5% of expected. In Fernandina Beach, efficiency increased from 37.5% to 176.1% of expected. And, in Mount Dora and Fort Pierce, efficiencies increased from 65% to 108% and from 52% to 115.6%, respectively.

       
       

   48. Respondent's GMC truck operation generated an operating profit of

       $453,876.00 in 1990. Respondent's dealership is principally devoted to the Pontiac line which comprises 85% of its total operation. Losses from the Pontiac operation accounted for the dealers loss position in 1989 and 1990. A review of Respondent's financial records suggest that existing profit opportunities stem from operational inefficiencies. After adjusting deferred

       income from previous years is taken into account, the dealership as a whole made approximately $96,000.00 before consideration of the sole owner's salary, leaving nearly two million dollars of undeclared deferred income in the dealership.

       
       

   49. Respondent's dealership, which was built in 1967 as a Pontiac dealership, added the GMC truck line in 1975. With the addition of the GMC truck line, Respondent made no discernible capital investment.

       
       

   50. Respondent's permanent investment in land, buildings, and equipment in its dealership is approximately $462,989.00. Most of its assets are relatively liquid and if liquidated in an orderly manner, the owners would receive approximately $4.1 million. If only the liquid assets were converted, the owners would receive approximately $3.7 million, leaving the land, buildings and equipment available for sale, lease or other investment opportunities.

       
       

   51. Dr. Lyman Ostlund, an expert in automotive retailing, determined that the relevant community or territory for this case consist of the StPete/Clearwater MDA including AGSSA 8. Dr. Ostlund eliminated fringe areas and included AGSSA 8 based on his determination that the level of cross-sell warranted such a configuration. However, he excluded the area occupied by Courtesy in Tampa with 28 registrations while including AGSSA 8 which had only

       10 registrations. Likewise, Dr. Ostlund related that a single registration by Bayview in 1991 reflects a sufficient level of cross-sell to regard AGSSA 8 as connected with the rest of the MDA from a marketing respective.

       
       

   52. Dr. Ostlund's reasoning and analysis is flawed for several reasons and is rejected. Noteworthy was Dr. Ostlund's inclusion of AGSSA 8 in the community or territory when in another case, he found it puzzling that Port Richey would be considered the same market along with Tampa and St. Petersburg. He considered the drive as a long and arduous one concluding that no one in its right mind would take that drive two or three times in their lifetime. Likewise, Dr. Ostlund attributes low GMC truck market share as being reflective of declining interest in GMC truck products. However, he failed to provide any

       statistical information that he relied upon as supportive of that claim. To the contrary, during the period of GMC truck's decline in the community or territory, GMC truck's marketshare in the nation and Florida increased.

       Similarly, Dr. Ostlund related that there are three possible causes for market efficiencies below zone or national average: the network; dealership operations; and unique demographic or other characteristics. While pointing to these factors as support for the possible causes for below market efficiency, Dr. Ostlund performed no statistical analysis to determine whether unique consumer characteristics were in any manner based on GMC's declining marketshare in the community or territory leaving dealer operations or network deficiencies as possible causes of low marketshare. Dr. Ostlund rejects consideration of insell as a component of opportunity. However, there was no empirical data provided to support the rejection of insell. Dr. Ostlund ignores the fact that in properly designed network markets, insell is reduced.

       
       

   53. Dr. Ostlund also concluded there was insufficient opportunity to support an additional dealer based upon a "5-mile ring" analysis. That analysis is likewise flawed since it uses the subject area as a standard for measuring its own performance which, as noted herein, has an inadequate number of dealers. Additionally, while acknowledging that dealer sales are made throughout the area, Dr. Ostlund's analysis ignores opportunities existing elsewhere in the community. Upon consideration of Dr. Ostlund's analysis, the lack of significant data to support his analysis and the flawed methodology used in

       support of both the definition of the market and the financial impact in his analysis, his inclusion of markets which were not properly in the community or territory and in other instances, included such markets, his entire analysis including his financial calculations. Finally, Dr. Ostlund relied on a "pump- in" and "pump-out" calculation. His theory that a low pump-in/out number reflects adequate representation is likewise rejected. A study of this calculation shows it to be as consistent with inadequate representation as it is with adequate representation with no particular relationship to either. His suggestion that there are too many GMC truck dealers in the community or territory because the MDA has the lowest ratio of truck dealer/GMC truck registrations of all GMARS markets misses the point completely and lends support to GM's contention that there are too few dealers to adequately serve the area. Low registrations per dealer has been found and demonstrated to be more consistent with operational problems and inadequate representation than it is with "over dealering." Significantly, Dr. Ostlund failed to explain why the Orlando market, which is about the same size as measured by industry registration and which has four dealers to the StPete/Clearwater MDA 3, is able to achieve 353 GMC registrations per dealer while the StPete/Clearwater MDA achieves only 150.

       
       

   54. Dr. Ostlund related that Respondent's level of advertising, being five times above average, reflects attempts to lure customers. He failed, however, to segment out the amount of such expenses which were attributable to GMC advertising and he admitted that those expenses were in combination with Pontiac, which represents 85% of the dealership business. The advertising analysis was at best superficial and did not shed relevance to the adequacy of representation issue.

       
       

   55. Similarly, Dr. Ostlund presented Respondent's Customer Satisfaction Index (CSI) score of 100 for the three-month period ending November 1991 as reflective of superior performance. That survey, which was based on four responses, was unreliable. Respondent's CSI for the preceding twelve-month period was below average in virtually every CSI category, including overall satisfaction with warranty service, delivery condition, sales staff, and service comebacks. Specifically, as of December 19, 1991, Respondent was ranked 379 out of 399 (with a numerical rank of one being the best).

       
       

   56. In this case, the community or territory and AGSSA 14, as an identifiable plot, failed to achieve minimum performance standards and there is adequate and sufficient opportunity for an additional GMC truck dealer. The addition of the proposed dealer, under these circumstances, will result in greater customer convenience and enhanced inter and intrabrand competition. The addition would also be in the interest of the public, the manufacturer, and existing dealers and would likely stimulate and maintain effective levels of competition.

       
       

       CONCLUSIONS OF LAW

       
       

   57. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this action pursuant to Section 120.57(1), Florida Statutes.

       
       

   58. The parties were duly noticed pursuant to the provisions of Chapter 120, Florida Statutes./

       
       

   59. The authority of the Respondent, Department of Highway Safety and Motor Vehicles, is derived from Chapter 320, Florida Statutes (1991).

   60. Section 320.642, Florida Statutes establishes the standards for issuance of a motor vehicle dealer license as follows:

       
       

       (2)(a) An application for a motor vehicle dealer license in any community or territory shall be denied when:

       2. The licensee fails to show that the existing franchise dealer or dealers who register new motor vehicle retail sales or retail leases of the same line-make in the community or territory of the proposed dealership are not providing adequate representation of such line-make motor vehicles in such community or territory. The burden of proof in establishing inadequate representation shall be on the licensee.

       
       

   61. Section 320.642 does not define the term "community or territory." However, the plain language of that section and principles of statutory construction compel the conclusion that determination of the relevant community or territory must be based upon facts presented at the hearing. Legislative intent is also determined primarily from a statute's language. See, Anthony Abraham Chevrolet Co. v. Collection Chevrolet, Inc., 533 So.2d 821, 824 (Fla. 1st DCA 1988). In determining relevant community or territory, the area described according to a contract between the manufacturer and the dealer is a material fact entitled to "great weight." Bill Kelley Chevrolet, Inc. v. Calvin, 308 So.2d 199, 201 (Fla. 1st DCA 1974); Larry Dimmitt Cadillac, Inc. v Seacrest Cadillac, Inc., 558 So.2d 136, 138 (Fla. 1st DCA 1990).

       
       

   62. Moreover, inadequacy of representation may be demonstrated either in the community or territory as a whole, or in an identifiable plot within the community or territory "not yet cultivated, which could be expected to flourish if given the attention which the others in their turns received... ." Bill Kelley Chevrolet v. Calvin, 322 So.2d 50, 52 (Fla. 1st DCA 1975) cert. denied 336 So.2d 1180 (Fla. 1976).

       
       

   63. In the case sub judice, the licensee presented competent and substantial evidence demonstrating that the relevant community or territory is Pinellas County. Significantly, GM presented extensive credible evidence establishing that from an auto marketing perspective, none of the GMC truck dealers outside the contractually defined APR were connected from a marketing perspective. Although a portion of Pasco County in the vicinity of Port Richey is also included in the APR, the evidence demonstrated that it too is not connected to the community or territory from a marketing perspective. Buyer behavior reflects that very few consumers from the Port Richey area purchased vehicles from dealers in Pinellas County and that through September of 1991, only one registration in Pinellas County was attributable to the GMC truck dealer in Port Richey. Therefore, it is concluded that the community or territory is comprised of three distinct areas of geographic sales and service advantage, AGSSAs 9, 10 and 14.

       
       

   64. Section 320.642 also does not define the term "adequate representation." However, in light of the manifest purpose denoted in the guiding legislation, it must be applied so as to give effect to the evident legislative intent. Griffis v. State, 356 So.2d 297, 299 (Fla. 1978).

   65. An express statement of legislative intent is contained in Section 320.605, Florida Statutes (1991):

       
       

       It is the intent of the Legislature to protect the public health, safety, and welfare of the citizens of the state by regulating the licensing of motor vehicle dealers and manufacturers, maintaining competition, providing consumer

       protection and fair trade and providing minorities with opportunities for full participation as motor vehicle dealers.

       
       

   66. The purpose of Section 320.642 is "not to foster combinations to prevent the introduction of dealer competition which is reasonably justified in terms of market potential." Bill Kelley Chevrolet, Inc. v. Calvin, 320 So.2d at 52.

       
       

   67. Based on the evidence adduced herein, and the stated criteria in evaluating whether existing dealers are providing adequate representation in the community or territory, GM introduced evidence demonstrating that in view of the phenomenal growth in the community or territory and particularly AGSSA 14, the absence of an adequate existing GMC truck dealer network to stimulate adequate inter or intrabrand competition, there is ample opportunity for a new dealer to make additional sales without depriving existing dealers of a single sale. This would be so, despite the addition of the proposed dealer. On the other hand, Respondent failed to demonstrate that any anticipated loss sales would result from the addition of the proposed GMC truck dealer. Additionally, the addition of the new dealership will benefit consumers and the public interest by maintaining competition and providing more convenient sales and service facilities to a large segment of the population on a level consistent with other competitive brands. After giving due consideration to Respondent's investment and its operations, nothing therein contradicts the existence of or sufficiency of the additional opportunities in AGSSA 14 or the community or territory as a whole. Moreover, when consideration is given to the declining market penetration in AGSSA 14 and the community or territory, this condition can only be remedied by the addition of a GMC truck dealer network which is able to meaningfully compete in the marketplace, a situation which has been progressively declining in the past three years. Finally, Respondent Harris' contention that its working capital and facilities were more than adequate cannot bridge the gap in the level of convenience which is offered by its competitors in the marketplace. For all of these reasons, and the fact that existing dealers are unable to draw consumers in sufficient quantities to adequately serve the area, it is virtually impossible for the existing dealers to serve, nor are they presently serving, the customers in the community or territory and particularly AGSSA 14.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that:

1. Respondent, Department of Highway Safety and Motor Vehicles, enter a Final Order approving Petitioner's application to establish the Stone GMC Truck Dealership in the vicinity of Palm Harbor, Florida.

DONE and ENTERED this 4th day of August, 1992, in Tallahassee, Leon County, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the

Division of Administrative Hearings this 4th day of August, 1992.

APPENDIX TO RECOMMENDED ORDER

Rulings on Petitioner General Motors Corporation/GMC Truck Division Proposed Recommended Order.

Paragraph 71, rejected, not probative and unnecessary.

Paragraph 74, rejected as conclusionary and not a finding of fact.

Rulings on Respondent Charlie Harris Pontiac, Inc. Proposed Recommended Order.

Paragraph 5, adopted as modified, Paragraphs 4, 5 and 6, Recommended Order. Paragraph 6, rejected, contrary to the greater weight of evidence, Paragraphs 5 and 9-12, Recommended Order.

Paragraph 7, adopted as relevant, Paragraph 3, Recommended Order. Paragraph 9, rejected, irrelevant and not probative.

Paragraph 10, rejected, irrelevant and not probative.

Paragraph 11, rejected, contrary to the greater weight of evidence, Paragraphs 9-12, Recommended Order.

Paragraph 12, rejected, unnecessary and not probative.

Paragraph 13, adopted as modified, Paragraphs 21, 22 and 23, Recommended Order. Paragraph 14, rejected, unnecessary and not probative.

Paragraph 15, rejected, contrary to the greater weight of evidence and calls for consideration of an inappropriate standard.

Paragraph 16, rejected, contrary to the greater weight of evidence and calls for consideration of an inappropriate standard, Paragraphs 23 and 24, Recommended Order.

Paragraph 18, rejected, contrary to the greater weight of evidence, Paragraphs 26-33, Recommended Order.

Paragraph 19, rejected, not probative. Paragraph 20, rejected, not probative.

Paragraph 21, rejected, contrary to the greater weight of evidence, Paragraphs 34, 35, 44, 46 and 56, Recommended Order.

Paragraph 23, rejected, contrary to the greater weight of evidence.

Paragraph 24, rejected, calls for consideration of an inappropriate standard. Paragraph 25, rejected, contrary to the greater weight of evidence and calls for consideration of an inadequate standard.

Paragraph 26, rejected, contrary to the greater weight of evidence and calls for consideration of an inadequate standard.

Paragraph 27, rejected, contrary to the greater weight of evidence, Paragraphs

48 and 49, Recommended Order.

Paragraph 28, adopted as modified, Paragraph 48, Recommended Order. Paragraph 29, rejected, irrelevant.

Paragraph 30, rejected, unnecessary.

Paragraph 31, rejected, contrary to the greater weight of evidence, Paragraph 43, Recommended Order.

COPIES FURNISHED:

EDWARD W RISKO ESQ

GENERAL MOTORS CORPORATION NEW CENTER ONE BLDG

3031 W GRAND BLVD DETROIT MI 48232

DEAN BUNCH ESQ

CABANISS BURKE & WAGNER 851 E PARK AVE TALLAHASSEE FL 32301

MARK HERRON ESQ

AKERMAN SENTERFITT EDISON & MOFFITT

PO BOX 10555

TALLAHASSEE 32302 2555

DANIEL E MYERS ESQ WALTER E FOREHAND ESQ FOREHAND AND MYERS

402-B N OFFICE PLAZA DR TALLAHASSEE FL 32301

MICHAEL J ALDERMAN ESQ DEPT OF HIGHWAY SAFETY AND MOTOR VEHICLES A432 NEIL KIRKMAN BLDG

TALLAHASSEE FL 32399 0500

CHARLES J BRANTLEY/DIRECTOR DIVISION OF MOTOR VEHICLES DEPT OF HIGHWAY SAFETY AND

MOTOR VEHICLES NEIL KIRKMAN BLDG

TALLAHASSEE FL 32399 0500

ENOCH J WHITNEY ESQ GENERAL COUNSEL

DEPT OF HIGHWAY SAFETY AND MOTOR VEHICLES

NEIL KIRKMAN BLDG TALLAHASSEE FL 32399 0500

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 91-006052

Orders for Case No: 91-006052